"file ./live/filesystem.squashfs failed the MDS checksum"

Look honestly unless there is some feature you absolutely must have that is the later versions I would stick with what you have. Even more so if you are using the parallel port. As the later installs do not use an RTAI kernel, which is best for parallel ports.
I think JT runs a lathe that is still on a version of Linuxcnc that runs on Ubuntu 8 or something like that back when the project was called emc2.
Unless you have a download of the image file that passes the md5sum test you are on the road to nowhere. Get that sorted first if you want to proceed.
Before anything back up your Linuxcnc folder that is in your home folder so you don't lose any of your Configs if things go bad.

It may help if you can give some info regarding the machine, are you using a parallel port or not, the CPU on the computer you wish to use, I don't want to look up the specs of the computer you are using as the same model can have different CPU, memory HDD and so forth.

Thank you. I will attempt to make the USB on my 2.7.15 Linux box.

I think I have identified my USB drive from dmesg

[ 0.000000] Kernel command line: BOOT_IMAGE=/boot/vmlinuz-3.4-9-rtai-686-pae
root=UUID=d6024873-2470-49d1-992d-a484c0ca8fdf ro initrd=/install/gtk/initrd.gz
lapic quiet rootdelay=5
[ 2.660091] usb usb1: Product: EHCI Host Controller
[ 2.660093] usb usb1: Manufacturer: Linux 3.4-9-rtai-686-pae ehci_hcd

Dell Optiplex 960. /proc/cpuinfo
Intel(R) Core(TM)2 Duo CPU E8400 @ 3.00GHz

Parallel port. The md5sum test passes.

I have backed up everything.
/proc/meminfo MemTotal: 3071164 kB

Are you telling me that upgrading past 2.7.15 may not work?